DNR decision to terminate Point Thomson unit stands

The State’s decision to terminate the Point Thomson unit stands, despite pleas from the Resource Development Council and others to reach a resolution with lease holders that would allow development to move forward.

The unit was terminated in late 2006 and that action was upheld in Alaska Superior Court in early 2008.

However,JudgeSharonGleasonremanded the decision to the Alaska Department of Natural Resources (DNR) so that the former unit owners could suggest an appropriate remedy leading to a development plan acceptable to the State.

In February the owners proposed a new plan of development, but in April DNR Commissioner Tom Irwin rejected it as a remedy. On May 12 the companies requested reconsideration; partial reconsideration was granted May 22, but ultimately rejected.

Irwin listed a number of “deficiencies” in the request for reconsideration, but said the request “on several issues merits a response so that a reviewing court has the benefit of DNR’s perspective.”

ExxonMobil has said it wants to reach an agreement with the State so that development can proceed. The company is moving forward with plans to begin drilling this winter. It is spending $20 million on a drilling rig capable of handling Point Thomson’s extreme high pressure. Soon the company plans to award multi-million contracts to barge in equipment and to build an ice road and airstrip to access the field.

In a letter to Irwin requesting reconsideration of his decision, RDC cautioned that rejection of the development plan, termination of the unit and the take back of leases would result in extensive litigation, delaying the project for years. RDC also pointed out if the State ultimately prevailed in breaking up the unit and taking back the leases, it would take additional time to release acreage and seek new lease owners. It would take even more time for the new leaseholder(s) to do the extensive engineering and reservoir studies already conducted by the current lease owners to become familiar with the complexities of the technically-challenged field.

RDC also noted the decision could jeopardize both the Denali and TransCanada gas pipeline projects to the Lower 48.

RDC believes the lease holders are fully committed to developing Point Thomson. See RDC’s comments here.

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